2.
EXECUTIVE SUMMARY
The adoption of a new technology in the business world is not dependant on flashy colors
and snappy sound-bites used in modern advertising. Whether or not a technology is
accepted or reject has much less to do with its aesthetic or technical merit than with its
potential Return-On-Investment, or as it is more commonly known, the bottom-line. Radio
Frequency Identification technologies are no exception. The technology has been around
since WWII, but has only in the past 10 years has the ROI become significant.
RFID INITIATIVES
As a result of a great many successful pilot programs, we see many retailers and
manufacturers running their own RFID pilot programs in order to evaluate their potential in a
real world environment. Others, like Wal-Mart, Peugeot, and the U.S. government, have seen
all they need to see. Both are currently committing to long term multi-million dollar RFID
initiatives for both themselves and their suppliers. With such bold and bullish tactics, the small
businesses that supply them are being forced into compliance.
WHAT TO EXPECT
All of these ultimatums and mandates are in the name of a faster, more stream-lined supply
chain that is less susceptible to theft and “Out-of-Stock” issues. Analysts are projecting huge
savings to be gained by the adoption of RFID technologies. While this makes the barcodes
future seem bleak, do not expect them to disappear overnight. Most implementations of
RFID tags will be in the form of a “Smart Label”, which feature a traditional barcode, RFID-
based Electronic Product Code, and a human readable label. This will allow for a certain
degree of backwards compatibility as well as fault tolerance and increased marketability.
As with most new technologies, there are obstacles to widespread adoption. For RFID
technologies, this opposition lies in privacy issues, as well as technical and logistical
concerns. Many warn that information may be gathered from RFID enabled devices without
the knowledge of the person to whom it belongs. This is serious cause for alarm among
privacy advocates and other Orwellian alarmists.
In the end, RFID tags are coming whether we like it or not. By breaking the chicken and the
egg paradigm, Wal-Mart and other large retailers are forcing a supply chain revolution that
calls for the enlistment of new hardware and software, as well as requiring employees to be
retrained. The lack of trained experts in this emerging field has already lead to the creation
of a new RFID discipline, which is to be appended to CompTIA’s catalog of technical
certifications.
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3.
INTRODUCTION
Few things move faster than big business. One exception is technology, which changes very
quickly, a lot quicker than most people would like. With most technologies people have the
choice to either accept or reject it. However, these decisions are often made for us by big
business. While this greatly increases the adoption rate of a given technology, it usually
comes at a premium. Every new technology comes with strings attached, almost always
requiring either modification or total replacement of existing infrastructure. In addition,
employees must be either retrained or replaced. Thus, adoption rates of new technologies
among businesses, and to a degree, consumers, depend entirely on the bottom line. When
the benefits provided by a given technology outweigh their perceived expense/risk, that
technology becomes economically viable. It is at this point that companies begin to adopt
or implement a new technology. However, it is important to note that what is viable for one
company may be extremely impractical for another. This type of cost/benefit analysis is also
known as the ROI or Return-On-Investment.
With so many buzzwords and acronyms being thrown around, it is easy to become jaded
towards new technologies and the lofty claims they ride in on. Lately, the most popular
acronym around is RFID, which stands for Radio Frequency IDentification. Think of them as
super barcodes. While the RFID technology has been around for close to fifty years, they
have only recently become economically and technologically viable for business
applications. This report will examine RFID technology in four parts. The first will be an
overview and brief history of barcode and RFID technologies as they relate to business
applications. Part two is concerned with the obstacles RFID technologies face, both now
and in the future. In order to better understand how this technology is being implemented
and with what degree of success, we will also explore several case studies and pilot
programs conducted by both retailers and manufacturers. Finally, we will discuss the
implications of this technology for everyone.
THE TECHNOLOGY
BARCODES
The story begins in 1948 at the Drexel Institute of Technology in Philadelphia. A local food
chain owner was overheard, by graduate student Bernard Silver, inquiring about the
possibility of product information being read during checkout. This intrigued Silver, who
partnered up with a fellow graduate
student by the name of Joseph Woodland.
On October 7, 1952, the first patent for a
barcode product was awarded to them.
Their concept was based on a 2
dimensional bulls-eye-like symbol (Figure-1), Figure 1: 1st Barcode Figure 2: Modern UPC
as opposed to the 1 dimensional barcodes
with which we are most familiar (Figure-2). Over the next two decades this technology was
commercialized (Bellis, 2004). A barcode is pretty useless without a device to read it. And if
you are going to read something, you and the person that wrote it are going to have to
agree on a language before any communication can take place. The need for “a common
language” or standard, called for the creation of a governing body that would handle such
matters. This governing body was the Uniform Grocery Product Council, which we know
today as the Uniform Code Council. Once a standard was decided upon, the first barcode
products were ready for public consumption. The first scanner was installed June of 1974 in a

4.
Troy, Ohio supermarket called Marsh’s. The first product scanned at the check-out counter
was a 10-pack of Wrigley’s Juicy Fruit chewing gum which you can see for yourself at the
Smithsonian Institution’s National Museum of American History.
How They Work
While we are all familiar with barcodes, most of us know little about how they actually work.
About.com describes the first barcode as a pattern of four white lines on a black
background. The first line was a datum line and the positions of the remaining three lines
were fixed with respect to the first. The information was coded by the presence or absence
of one or more of the lines. This allowed 7 different classifications of articles. However, the
inventors noted that if more lines were added, more classifications could be coded. With 10
lines, 1023 classifications could be coded. The most current standard is so-called Code 128,
which allows for the encoding of the full 128 character ASCII set.
What They Can Offer
Before the advent of the barcode, a manual record had to be kept of all inventory. This
process was tedious and highly error prone. Usually merchandise was counted on the shelf
rather than at the time of checkout. With the advent of UPC technology, Taking inventory
just involved a quick scan by a reader and it was on to the next item. While this greatly
reduces the potential for human error and is considerably faster, it still requires someone to
physically scan every parcel. Every time an item is counted or “touched”, it costs time.
Which, as we all know, time is money. Therefore anything that can be done to reduce the
number of “touches,” will also save money.
RFIDs
Despite their recent popularity, RFIDs are not a new technology. They have been around
since World War II. The United Kingdom was using RFID devices to distinguish returning English
aircraft from inbound German ones (Wikipedia, 2004). RFIDs found another purpose in the
1980s in the form of keyless entry systems for cars and restricted areas. However, it is only in
the past ten years that the ROI has made it practical for widespread commercial use. This is
primarily due to advancements in the lithographic processes used to print the circuitry which
makes RFID technology possible.
How They Work
An RFID System consists of three components: a transceiver, a
transponder, and each require at least one antenna. The transponders,
or RFID tags, come in a variety of flavors, as seen in Figure 3. RFID tags are
available in two flavors, active and passive. You then have your choice
of either read/write or read only models. Passive tags use the principles of
electromagnetic induction to produce a very small current in the
antenna which is used to power the tags integrated circuitry.
Alternatively, active tags feature a power source, lasting as long as
several years, that serve to both boost the radio signal as well as making
it possible for the storage of more information over a longer period of Figure 3: RFID Tags
time than traditional passive tags. So once a tag is powered either
actively by an onboard battery or passively, by a nearby transceiver (reader), it is then
“interrogated” for the information held in its memory. Finally, this information is acted upon
by some sort of programmable logic device. A programmable logic device is either a
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5.
computer or a proprietary embedded system that is able to take the necessary action
based on a given set of conditions. These devices communicate on a variety of frequencies,
ranging from 125 kHz to 5.8 GHz, each having their own strengths, weaknesses, and
applications. (Wikipedia, 2004)
What They Can Offer
RFID tags offer real time, accurate data acquisition that requires almost zero manual labor to
obtain. With this information you are able to spot potential problems in the supply chain and
correct them proactively. With RFID technologies, retailers and manufacturers can keep
track of their assets all the way from the warehouse to the check out counter. RFID tags offer
increased savings over conventional barcode systems which were error-prone and required
costly “touches” in order to be counted. Using RFID tags to identify products, your inventory
can be kept in real time by scanners placed on the shipping bay doors. As a pallet leaves
the warehouse, your inventory is automatically updated in real-time. Should your stock drop
below a certain point, an automated purchasing order can be sent to your supplier.
Imagine you walk into your warehouse to fill an order and everything is randomly stacked on
the shelf. Your entire inventory is mixed with no sign of a logical sorting method. How can you
possibly find anything? RFID smart labels make such organization, or the lack there of, not
only possible, but profitable and efficient. Before your inventive warehouse organization
technique, if an order came in for product A and product Z, you would have to walk from
one end of your warehouse to the other in order to fill that customers order, presuming you
stock your shelves alphabetically. Now imagine you are using your new “put it the first place
you find” shelf stocking technique. The same order comes in and your handheld RFID reader
informs you that the closest Product A is on the shelf to your right and Product B is around the
corner on the top shelf. This unique form of organization has been statistically shown by a
computer model to be a more efficient method of sorting than traditional techniques
(Wikipedia, 2004).
APPLICATIONS
The following list, compiled by UsingRFID.com, outlines the major business applications of RFID
technology:
• Inventory management
• Improved efficiencies in shipping and receiving
• Reduction in 'shrinkage' (loss of goods or assets)
• Reducing 'out of stock' situations
• Asset and resource tracking
• Improving quality control
The most obvious application of RFIDs is to replace or at least enhance barcode
technologies in B2B applications. The following table illustrates some of the differences
between the conventional UPC barcode systems and the modern Electronic Product Code.
UPC EPC
Requires line of sight Can be read for variety of distances
Cannot be rewritten Available in a Read/Write format
Comparatively narrow applications for use Very diverse applications for use possible
Extremely cheap to print considerably more expensive to print
Infrastructure is already in place Infrastructure virtually non-existent
Very little room to grow Large amounts of head room for future applications
Figure 4: UPC vs EPC
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6.
Now
Applications of RFID technology currently range from pet identification systems to the OnStar
tracking and information system found in luxury vehicles. The following table depicts some of
the current uses of RFID technology by the frequency they occupy.
Frequency Application
Low (125 kHz) Pet identification, beer keg tracking, keyless entry, anti-theft systems
Library books, pallet tracking, building access control, airline baggage tracking,
High (13.5 MHz)
clothing, identification badges
Ultra High (400-930 MHz) Pallet and container tracking, truck and trailer tracking in shipping yards
Microwave Toll booths, long range access control for vehicles, i.e. GM’s OnStar system
Figure 5: Current RFID Applications
Perhaps the main use of RFID technology that we are likely to see, now and for many years
to come, is in the form of so-called “smart labels”. These are labels that offer a human
readable description, a standard barcode, and a RFID tag. This will allow for the co-
existence of all the forms of inventory tracking and management. One of the first major
implementations of smart label technology will be in the pharmaceutical industry, where
counterfeit medications have become a serious problem. Drug manufactures hope smart
labels can help to eliminate this problem before it gets any worse.
Later
In the future, we will see RFID tags find their way into a lot more than our cars and pets.
Imagine wearing a very small sticker on the back of your watch or tucked away in your
wallet. You are arriving home from work and upon approaching the front door, the outside
light turns on, the front door unlocks, and then opens itself. As you move through the home
the lights are turned on and off appropriately. This is just a small example of things to come.
These changes will be enabled by the advent of new RFID manufacturing processes like
“Chipless” RFID smart labels. These labels will feature a10m interrogation ranges and 256 bits
of storage capacity, at a projected one tenth the cost of their silicon-based predecessors
(Wikipedia, 2004). While much of the speculation on RFIDs future potential is speculative and
highly dependant on the success of ongoing scientific research, one thing is for sure, retail
companies will be at the forefront. Already clothing companies, like Prada, are using RFIDs in
their clothing and “preferred customer” cards to augment their retail stores (Learning from
Prada, 2004).
Currently a subsidiary of the UCC, known as EPCglobal, has been formed and is creating a
standard known in short as EPC or Electronic Product Code. EPC’s will eventually replace
UPCs or Universal Product Codes, but do not hold your breath, because the barcode is not
going away anytime soon. Too much time, effort, and infrastructure are already in place for
barcodes to disappear overnight (Wikipedia, 2004).
THE RFID MARKET
The RFID market for the year of 2003 was ~3.1 billion, according to Allied Business Intelligence,
a respected research firm. The largest RFID consumer was of course the U.S. military, which in
late 2003, mandated that all goods purchased by the military were to be tracked using RFID
technology. This, combined with dropping prices for RFID enabled products and increased
public visibility, has greatly spurred adoption of the technology (Marselli, 2003). The current
year, 2004, has seen many RFID pilot programs started by both large and small businesses.
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Many major retailers and manufactures have launched pilot programs, such as Wal-Mart,
Michelin, UPS and others. 2005 looks to be the year for actually wide-spread implementation
of RFID systems. Also worth noting, the price of passive RFID tags is expected to drop to less
than 5 cents in 2005(Dixon, 2004). The compliance deadlines for many suppliers of the
Department of Defense and Wal-Mart, to implement RFID systems either partially or in full, are
also coming in 2005. “Within the current decade more of these RFIDs will be made each year
than there are people alive on earth. Once prices fall to less than 2 cents per tag, retail
usage will explode with anything from 20 - 40 billion tagged products sold a year” (Dixon,
2004).
OBSTICALS
PRIVACY
Many privacy concerns have been raised, from frivolous Orwellian claims of big brother, to
real issues of personal privacy that affect us all. Some fear that a burglar could effectively
window shop from house to house with an RFID reader. Others warn that the technology
could be used to track you long after leaving the retailer’s store (Gross, 2004). While these
concerns are largely unfounded, some are raising very real questions about RFID
technologies potential for abuse. Chairman of Global Change Ltd, Dr. Dixon said, “Hacking
into RFIDs is not so difficult. Devices at present have such tiny memories and processing
power that hacking is less of a technical challenge than entering a corporate server - and
once you succeed, hundreds of millions of tags are then wide open for reading and writing
data” (2004).
The public has largely responded negatively towards the placement of RFID tags on an item
level. Many consumer and privacy advocates are pushing for retailers to voluntarily notify
their customers of the presence of RFID tags in the goods they purchase. Others are pushing
for a way to effectively kill the chips at the time of purchase. Ari Schwartz, associate director
of the Center for Democracy and Technology (CDT) is quoted as saying “Most of the benefit
out there comes on the back end, in the stock room, and most of the privacy concerns
come when it leaves the stock room” (2004).
INFRASTRUCTURE
New RFID systems are being developed constantly. However, RFID technologies require a
great deal of infrastructure to be in place before you can take advantage of its many
benefits. Handheld RFID readers currently cost approximately $2,000. RFID tags range from
twenty-five cents to a dollar a piece, depending on form-factor, capacity, and type. Don’t
forget, you are going to need special printers for on demand printing of the so-called “Smart
Labels”. In addition to these hardware requirements, implementing an RFID system also
requires the purchase of new software with which to manage and track your inventory. With
new infrastructure also comes the need to train employees on the proper operation of the
new systems. In fact, CompTIA will be offering a new certificate in RFID applications very
soon.
Perhaps one of the most important things to come will be the adoption of RFID standards.
Currently there are many RFID related standards on the table. ISO 15693 defines how RFID
readers and tags communicate with each other. ISO 18000 covers a broader range that will
encompass ISO 15693 as well as adding additional functionality. Another standard, ISO 14443
has been in use for “smart cards” in financial applications for some time now.
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8.
CASE STUDIES
So who is currently using or piloting RFID technologies? RFID enabled technologies can be
found in the dressing rooms of Prada’s New York retail outlet. The tags appear on the
clothing and become activated when in close proximity to the readers, which are located in
walls of the dressing room. This allows the shopper to pick different sizes, colors, and
matching accessories to the outfits they are trying on. (Learning from Prada, 2004). RFID tags
are also being tested in several airports to track luggage as well as passengers. The U.S.
government recently approved a proposal to embed RFID tags in U.S. passports, in hopes of
speeding up air travel as well as increasing security. Even water parks are using RFID tags to
allow customers to store money on RFID enabled wristbands. This provides obvious benefits to
the customer, but it provides an unparallel level of statistical data to the park. With this
technology, they can easily track, in real-time, where you go within the park, what you do,
for how long, and with whom you were with. This information can then be used to improve
the layout and design of the park or to simply reunite families whose children are lost.
WAL-MART
The largest retailer in the world, Wal-Mart, has 100 distribution centers, 3000 stores, and
handles nearly100 million pallets which hold over 3 billion cases and cartons each year (RFID
Webinar, 2004). After recently deciding they were ready to invest in RFID technologies for use
in their supply chain management systems, Wal-Mart went ahead and decided that their
top 100 suppliers were also ready to take the plunge and that they would do so by January
1, 2005. Wal-Mart’s first phase is to use pallet and case/carton level tracking in 3 regional
distribution centers, and 150 stores (RFID Webinar, 2004).
An Offer They Can’t Refuse
In 2003, Wal-Mart’s revenues were approximately 250 billion dollars. That same year, the GDP
of Columbia was approximately 255 billion dollars. Wal-Mart is now using its massive market
presence in order to force its suppliers to adopt a technology that they would have
otherwise waited to mature and become more standardized. Wal-Mart has not only shown
leadership, but they have effectively broken the chicken and egg paradigm that plagued
this budding technology. Wal-Mart’s commitment to RFID technology is made clear in the
recent expansion of their original ultimatum. Now, not only do their top 100 suppliers have to
be “RFID compliant” by January 1, 2005, but all of the suppliers must be RFID compliant by
the end of 2006 (RFID Journal, 2003).
PEUGEOT
Vehicle manufactures were some of the first to see the benefits of RFID technologies. In
Poissy France, at the Peugeot car plant, a large network of over 80 Eureka RFID readers and
over 2000 Eureka 415 Read/Write RFID tags are streamlining the manufacturing process. A
highly durable RFID tag is attached to the frame of the vehicle at the begging of the
assembly line. Through out the build process, information is passed back and forth between
the tags and the interrogating antennae placed along the assembly line. These tags can
allow for a car to be constructed based on a custom order received from a car dealer. This
type of real-time manufacturing was never before possible with conventional unidirectional
barcode technologies. At the end of the assembly line, the RFID tags are removed from the
cars and recycled. This also allows car dealers to have real-time information about the stock
or status of a particular vehicle (Production line tracking at Peugeot).
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9.
IMPLICATIONS
In order to understand the many implications of RFID enabled technologies, we should first
compare RFIDs potential usefulness to the existing methods of inventory management and
supply chain tracking. It is largely because of the costs of upgrading/replacing their current
systems coupled with the fear of “rocking the boat”, so to speak, that more manufacturers
and retailers have not already adopted RFID enabled technologies. As more and more
businesses see the success obtained through the use of RFID systems by other industries and
their competitors, we will see a marked increase in the RFID market. As previously stated, the
largest proponents of RFID technology are the U.S. government and large retailers, both in
the U.S. and abroad. Due to the current costs of RFID tags, between $0.25 and $1, we are
more likely to find them used with pallet or case based tracking, with the exception of some
higher priced items like electronics or automobiles. In the near future however, as the price
of RFID tags lowers to less than 5 cents a piece we will begin see them integrated into
everyday items. These benefits extend to the consumer as well, who will receive an
incredible influx of “smart” devices. These will be RFID enabled devices that will serve to
further automate homes, and businesses.
CONCLUSIONS
Despite the outrage of many doomsayers and privacy advocates, RFID Technology is poised
to change the way we not only do business, but also the way we live. Because of RFID
enabled devices, we can already drive through toll bridges and pay for gas without pulling
out your wallet. In the years to follow, we will begin to see RFID tags on everything from your
new TV to your toothbrush. RFID enabled retailers will be able to reduce theft and “Out of
Stock” situations while increasing productivity, as well as maintaining a smaller, more efficient
inventory. Advertisers will be able to target you with specific ads based on the RFID tags
embedded in your belongings.
The biggest proponents of RFID technology have been the U.S. government as well as large
retailers like Wal-Mart. They are doing a great deal to spur the adoption rate of the RFID
technologies that make this all possible. By exercising their massive marketing muscle, they
can single handedly drag the retail and manufacturing markets, as well as the rest of us,
kicking and screaming into the future. Many small businesses will have no choice but to go
along with the crowd, especially considering the RFID compliance mandates and
ultimatums being issued around the world by governemtents, manufacturers and retailers
alike. The RFID market will continue to rise exponentially for many years to come with many
new and exiting avant-garde applications for businesses and consumers alike.
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